Recently, we've had questions arise as to why it’s important to add TriLitco as Additional Insured onto your Homeowner’s or Property Owner’s insurance policy. We've complied some helpful tips for setting up the insurance, and have listed some of the key questions we've been getting and their responses below for your reference. Helpful Tips for Setting Up Insurance For Your Rental Property: Make sure that your Insurance Agent understands that you are requesting that TriLitco LLC be added as “Additional Insured”, not merely “Additional Interest”. Ask if there is an additional charge for the “Additional Insured” endorsement. If there is you may want to shop around but remember that the overall cost effectiveness of your policy may still be better even with an additional fee. Let your Insurance Agent know that TriLitco LLC is owned and operated by an IREM® Certified Property Manager® (CPM®). This designation is highly regarded in real estate, and some insurance companies will give you a small discount if they are made aware that you've hired a CPM® to manage your rental property. Why should I list TriLitCo as 'Additional Insured' or 'Co-Insured' on my Insurance Policy? Experienced and well informed management firms are increasingly requiring the property owner to add the Property Management Company as Additional Insured on the owner policy. While often overlooked out of convenience or misinformation, it is a very important element of an overall risk management strategy not only for the property management company but also for the property owner. Under Section 10 of your Property Management Agreement with TriLitco, we listed this requirement for insurance. If you are unable to obtain insurance that included TriLitco LLC as Additional Insured, our Broker may purchase insurance that will provide TriLitco the same coverage as the required under Paragraph 10A(1) and the expense will be deducted from the rental income of your property. Please give us a call to obtain the estimated cost of insurance through TriLtico's insurance provider. What does “Additional Insured” mean? The Additional Insured verbiage on a homeowner’s policy simply means that the coverage is extended not only to the owner of the property but also to the listed agent or Management Company. Some insurance agents and property managers will confuse “Additional Insured” with “Additional Interest”. They sound similar but are vastly different. “Additional Interest” does not extend coverage but will simply notify the property manager of policy renewals, cancellations, or policy changes. Another common misconception is that the Additional Insured verbiage will provide the property management firm with a financial interest in the property. Unlike a mortgage holder, the property management company does not have, or want, a financial interest in the property but nevertheless has a very insurable interest from a premises liability standpoint such as personal injury on the premises. Why is adding the Property Manager as Additional Insured important to the property owner? When a property manager is hired they take on almost all of the responsibilities as if they were the homeowner. As such, if something were to go wrong, such as personal injury, the Property Manager is often the target, in place of the owner, of any resultant litigation. For this reason, almost all reputable property management firms have a strong indemnification and hold harmless clause as part of their management agreement. If the management company is properly listed as Additional Insured, the coverage will automatically be extended to both parties as needed. In the worst of cases, if a major litigation claim takes place, it is likely that both Property Manager and Owner would be named as co-defendants. Having the owner policy extended to both, would create a unified defense, with one insurance company defending both, streamlining the defense process and significantly reducing total legal expenses for all for which the owner (or the insurance company) is ultimately responsible. Why is the Additional Insured endorsement on the owner’s policy important to the Management Company? Most Property Management firms carry General Liability Insurance as well as Professional Liability insurance which will offer protection from a financial loss caused by a mistake or wrongful act by the Management Firm. However, these policies don’t provide protection against matters concerning the home itself. This leaves the property manager vulnerable to claims regarding someone injuring themselves at the property, burglary, fire, water leaks, etc. When coverage is effectively extended to the Property Manager through the Additional Insured endorsement, the problem is solved. Without the Additional Insured endorsement, the management company could be left to fend for itself and then seek reimbursement from the owner directly (or their insurance) for any losses under the indemnification clause. Needless to say, this alternative would be exponentially more expensive and time consuming for all. Are Insurance Companies willing to add the property manager to the owner’s policy as Additional Insured? Most of the larger insurance companies understand that doing so is in their customer’s best interest and will add the property management firm upon request for little or no additional cost. However, some of the smaller or specialized companies view adding a third party to the policy as taking on additional risk and refuse to do so. While there may be some merit to their viewpoint, it can be argued that using a professional management company will reduce overall risk and that since the owner is indemnifying the management company, they would eventually be faced with a payout on behalf of their customer. Accordingly, their total cost of a payout could be significantly reduced if they are in control of the claim from the beginning. If we can answer any further questions please contact the TriLitco Property Management Office at 512.270.0489 or info@trilitco.com.
